Fintech firms drive surge in bite-sized loans

MANILA, Philippines — Short-term loans with smaller borrowing amounts have increasingly become a prevailing trend among Filipino borrowers, reflecting a growing preference for manageable repayment periods and reduced financial commitments, according to CIBI Information Inc.

The local credit bureau and screening solutions firm reported that financial technology companies are now offering smaller loans with repayment terms shortened to less than six months, compared to six to twelve months before the pandemic.

“That’s the shift that we’re seeing that today most of the consumers prefer smaller loan amounts and shorter in tenor, meaning two months only or three months only then it is fully repaid. So it became high frequency so they can get another loan, bite sizes,” Harley Chan, CIBI’s chief analytics officer, said.

Based on the report, loans exceeding P100,000 declined, while smaller loan brackets or those below P5,000, P10,000, P25,000 and P100,000, registered notable increases during the same period.

When asked about the decline, Chan explained that the shift stems from changing consumer behavior, as many borrowers now prefer smaller but more frequent loans, choosing to avail themselves around P25,000 multiple times within a year rather than taking a single and large P100,000 loan in one go.

“That’s also reduces the borrower’s monthly obligations,” he said “When the individual splits the loan amount and the individual does not need the whole amount, then it allows him to have smaller obligations, thus, there’s a shift of preference.”

CIBI’s head of products Jasmine Gonzales said more people have been availing themselves of smaller loan amounts, indicating a broader borrowing base compared to previous years when fewer borrowers took out larger loans.

“This tells you of the dynamic shift that we’re seeing in the market, where more people have access to credit but smaller ticket sizes and how financial technology companies are really helping us to access that credit behavior in the market,” she said.